On Monday, we talked about watching High Yield Corporate Bonds (JNK) and 20+ Year Treasury bonds (TLT) ETF as risk-on or off indicator. With risky JNK moving lower and TLT pushing higher, this gave us more caution for trading on Tuesday.
It turns out being cautious was the right side to take, as the four major indices, including the Dow Jones, S&P 500, Russell 2000 and the Nasdaq 100, took a morning dive. However, much of the trading day was spent drifting sideways or slightly lower. While the small selloff points to normal market digestion after a hasty run to highs, the media continues to add overhead pressure with its focus on increasing consumer prices. Therefore, we should look at more inflationary plays; for instance, precious metals and food if the market begins to struggle at its current levels.
When it comes to precious metals, we like to watch the Gold (GLD) and Silver (SLV) ETFs. Both have been trending higher recently, with GLD sitting near resistance around $171.55, as seen in the above chart. On other hand, SLV has resistance at $23.04. Since both are close to resistance, anyone looking for a trade entry can watch for a breakout past these pivotal price levels. Also, when trading these ETFs, it helps to give them room and not attempt to trade them tightly, since they tend to gap around at times.
When looking at the agriculture sector, Invesco DB Agricultural Fund (DBA) is a great way to capture the space. However, it should be noted that DBA has major resistance to clear around $19.48. Before DBA can take off, it will need to clear and HOLD over this price area. Therefore, as the week continues to unfold, keep an eye for potential trade setups if the market struggles to build back bullish momentum.
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- S&P 500 (SPY): 465 minor support.
- Russell 2000 (IWM): 237-240 support area.
- Dow (DIA): 360 support area.
- Nasdaq (QQQ): 393.92 minor support.
- KRE (Regional Banks): 72.90 support area.
- SMH (Semiconductors): 294 minor support.
- IYT (Transportation): 274 support.
- IBB (Biotechnology): 153.38 main support.
- XRT (Retail): 100 minor support.
Assistant Director of Trading Research and Education